Bulls, Bears & Bucks #07: FED regelt bail-out voor 'n koopje.

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Avoid Overcorrecting Economy, Bush Warns

WASHINGTON (AP) -- President Bush on Saturday said the government must guard against going too far in trying to fix the troubled economy, cautioning that "one of the worst things you can do is overcorrect." Democrats said Bush was relying on inaction to solve the problem.
Bush, in his weekly radio address, said the recently passed program of tax rebates for families and businesses should begin to lift the economy in the second quarter of the year and have an even stronger impact in the third quarter. But he urged caution about doing more, particularly about the crisis in the housing market where prices are tumbling and home foreclosures have soared to an all-time high.

"If we were to pursue some of the sweeping government solutions that we hear about in Washington, we would make a complicated problem even worse -- and end up hurting far more homeowners than we help," the president said.

The economy has surpassed the Iraq war as the No. 1 concern among voters in this presidential election year amid big job losses, soaring fuel costs, a credit crisis and turmoil on Wall Street.

"In the long run, we can be confident that our economy will continue to grow, but in the short run, it is clear that growth has slowed," Bush said. He was spending the weekend at the Camp David presidential retreat in Maryland's Catoctin Mountains after delivering a speech in New York about the economy and helping raise $1.4 million for the national Republican Party.

Democrats said they would try to strengthen the economy with measures dealing with housing, energy efficiency and renewable energy.

"The president continues to convince himself that inaction is the cure-all for the economic problems hurting hardworking Americans," Senate Majority Leader Harry Reid said in a written statement. "But Democrats know that wait-and-see is not a responsible strategy for an economy that is teetering on the brink of recession."

"Wages and home values are down," Reid said, "but prices for everything from health care to tuition to energy are up. Just this week, oil and gas prices reached record highs while the value of the dollar reached historic lows. I hope the president, who has been slow to acknowledge this problem, joins us in recognizing how urgently we need a solution."

Bush said he opposed several measures pending on Capitol Hill to deal with the housing crisis. They included proposals to allocate $400 billion to purchase foreclosed-upon and now-abandoned homes, to change the bankruptcy code to allow judges to adjust mortgage rates and to artificially prop up home prices.

"Many young couples trying to buy their first home have been priced out of the market because of inflated prices," the president said. "The market now is in the process of correcting itself, and delaying that correction would only prolong the problem."

Bush said his administration has offered steps offering flexibility for refinancing to homeowners with good credit histories yet are having trouble paying their mortgage. He cited other measures which he said would streamline the process for refinancing and modify many mortgages.

He said there were steps Congress could take, as well.

"As we take decisive action, we will keep this in mind: When you are steering a car in a rough patch, one of the worst things you can do is overcorrect," the president said.

"That often results in losing control and can end up with the car in a ditch," Bush said. "Steering through a rough patch requires a steady hand on the wheel and your eyes up on the horizon. And that's exactly what we're going to do."

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Op zaterdag 15 maart 2008 11:48 schreef freud het volgende:

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Wat me best opvalt, is dat de gemiddelde nederlander echt geen idee heeft van wat er speelt. Soort van een tsunami die er aan komt en men ligt lekker te zonnen met de voetjes naar de zee, en vertellend hoe rustig het is. Werk zelf bij een importeur van twee automerken, en daar beseft men echt niet dat er zwaar weer aankomt door die geintjes in de VS. Gelukkig ben ik er over 2 maandjes weg .

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Op zaterdag 15 maart 2008 20:43 schreef SeLang het volgende:
Dus een doemdenker ben ik zeker niet. Alle problemen zullen uiteindelijk worden opgelost. Maar ik denk wel dat we een dip te wachten staan die wat groter is dan we de laatste jaren gewend waren.

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Op zaterdag 15 maart 2008 15:35 schreef Perrin het volgende:
Jim Rogers: 'Abolish the Fed'
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Quantum's Jim Rogers says US 'out of control'

Leo Lewis, Asia Business Correspondent

Jim Rogers - who co-founded the now closed Quantum Fund with George Soros - told 750 global fund managers in Tokyo today that, America is “completely out of control”, there will be a 20-year bull market in commodities and that prices will be in turmoil.

And he also warned that it “made sense” if global competition for resources ended in armed conflict.

Mr Rogers told delegates to the CLSA investment forum that the prices of all agricultural products would “explode” in coming years and that the price of gold, which hit an all-time high of $964 an ounce yesterday, will continue its surge to as much as $3,500 an ounce.

Gold would continue to rise, the analyst Christopher Wood told fund managers, “because it is the exact opposite of a structured finance product”.

In a blistering attack on US monetary policy and the “helicopter cash drop” responses of the Federal Reserve, Mr Rogers described the American dollar as a “terribly flawed currency”.

He said that the plan by Ben Bernanke, the Fed Chairman, to “crank up the money-printing machines and run them until we run out of trees” had exposed America’s weakest point to her rivals and enemies.

The dollar may have declined recently, he added, “but you ain’t seen nothing yet”.

Talking to a room almost exclusively populated with Japan-focused equity investors, Mr Rogers recommended an immediate language course in Mandarin and a switch into commodities — the second-biggest market in the world behind foreign exchange.

Mr Rogers said that historic drains on wheat, corn and other soft commodity inventories have created market dynamics that could lead to severe food shortages.

The outlook over the next two decades would see prices of everything from cotton and sugar to lead and nickel “going through the roof”.

Heavily playing down the prospects of a big recovery in Japan, Mr Rogers said that the country’s demographics — as the fastest-ageing country in the world — would cause it greater problems and an ever-diminishing quality of life for ordinary Japanese.

But he also said that other countries — including Britain, Italy, China and the US — should take note of what their own demographics would look like without the effect of immigration.

“Japan will be the perfect laboratory for the world to watch how a demographic crisis plays out,” he said.

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A Wall Street Domino Theory

Bron : NY-times

The Federal Reserve’s unusual decision to provide emergency assistance to Bear Stearns underscores a long-building concern that one failure could spread across the financial system.

Timothy F. Geithner, president of the New York Fed.


Wall Street firms like Bear Stearns conduct business with many individuals, corporations, financial companies, pension funds and hedge funds. They also do billions of dollars of business with each other every day, borrowing and lending securities at a dizzying pace and fueling the wheels of capitalism.

The sudden collapse of a major player could not only shake client confidence in the entire system, but also make it difficult for sound institutions to conduct business as usual. Hedge funds that rely on Bear to finance their trading and hold their securities would be stranded; investors who wrote financial contracts with Bear would be at risk; markets that depended on Bear to buy and sell securities would screech to a halt, if they were not already halted.

“In a trading firm, trust is everything,” said Richard Sylla, a financial historian at New York University. “The person at the other end of the phone or the trading screen has to believe that you will make good on any deal that you make.”

Commercial banks, mutual fund companies and other big financial firms with deep pockets would presumably weather such turmoil. Firms that traded extensively with Bear Stearns could be at great risk if the bank failed.

For individual customers, the Federal Deposit Insurance Corporation insures deposits up to $100,000. Furthermore, when a Wall Street firm fails, the Securities Investor Protection Corporation steps in to take over customer accounts.

The Fed’s action was intended simply to keep the financial markets functioning. Since various trading markets seized up in August, credit conditions have steadily worsened, and interest rate cuts, the main tool central bankers use to bolster the economy, have become less effective.

Policy makers anticipated some of the problems now affecting the financial world. In 2006 and 2007, Timothy F. Geithner, president of the Federal Reserve Bank of New York, asked major Wall Street institutions to gauge the impact on their portfolios if a large bank failed.

The volume of financial contracts that are not traded on any major exchanges has ballooned in recent years after the bailout of a big hedge fund, Long-Term Capital Management, in 1998. Now, much of the trading in derivative contracts tied to stocks and bonds takes place in unregulated transactions between financial institutions.Policy makers have been wrestling with questions about when and how they should provide assistance since the last major bailout of a tottering bank, Continental Illinois, in 1984. At the time, Continental was considered too big to fail without sending waves of losses through the financial system.

Regulators are facing an unprecedented and widespread deterioration in many markets. Last summer, the value of risky and exotic securities plummeted in value. Now, even top-rated securities once deemed as safe as Treasuries have hit the skids. Financial firms have written down more than $150 billion of their assets. Some analysts are predicting that losses in various credit markets will reach $600 billion.

Bear Stearns was one of the first firms to experience a direct blow from the subprime mortgage crisis when two of its hedge funds collapsed because of the declining value of mortgage-backed securities.

It is also among the biggest firms in the prime brokerage business, or the financing of hedge funds. In recent weeks, nervous fund managers have scrambled to protect themselves. Robert Sloan, who is the managing partner at S3 Partners, a financing specialist that works with hedge funds, has shifted $25 billion out of Bear Stearns accounts in the last two months, he said.

“The problem is the financing of the hedge fund industry is very concentrated and very brittle,” Mr. Sloan said. “If they go under, you will have thousands of funds frozen out,” he said, adding that everyone might then have to wait for a court to name a receiver before business could resume.

Hedge funds rely on Wall Street for a range of services from the humdrum, like holding their securities, to the critical, like providing loans they use to increase their bets. As Wall Street has buckled under multibillion-dollar write-downs, the firms have cut financing to hedge funds and asked the funds to put up more assets to back their borrowing, forcing managers to sell en masse.

This has caused a series of hedge fund blowups, including Carlyle Capital, an affiliate of the powerful private equity firm Carlyle Group; Peloton Partners, a hedge fund founded by former Goldman Sachs traders; and Drake Capital, a blue-chip fund that has been struggling.

A manager at one hedge fund that uses Bear Stearns as its prime broker said his firm had been nervously watching the situation. The manager, speaking on the condition that he or his fund not be identified, said the fund had lined up backup firms that could clear its trades and keep its portfolio, though as of Friday afternoon it had not left Bear Stearns.

Customer accounts at financial institutions are kept separate from banks’ and dealers’ own holdings to protect those funds if the broker has to seek bankruptcy protection.

But the bigger worry for hedge funds and others that do business with Bear Stearns is whether the firm will be able to honor its trades. Of particular concern are the insurance contracts known as credit default swaps in which one party agrees to guarantee interest and principal payments in case an issuer defaults on its bonds. Investors in such contracts with Bear Stearns are closely studying whether they can get out of them or have them transferred to a more stable firm.

Compounding the problem, some big investment banks this week stopped accepting trades that would expose them to Bear Stearns. Money market funds also reduced their holdings of short-term debt issued by Bear, according to industry officials.

“You get to where people can’t trade with each other,” said James L. Melcher, president of Balestra Capital, a hedge fund based in New York. “If the Fed hadn’t acted this morning and Bear did default on its obligations, then that could have triggered a very widespread panic and potentially a collapse of the financial system.”

Already, investors are considering whether another firm might face financial problems. The price for insuring Lehman Brothers’ debt jumped to $478 per $10,000 in bonds on Friday afternoon, from $385 in the morning, according to Thomson Financial. The cost for Bear debt was up to $830, from $530.

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Op zondag 16 maart 2008 06:13 schreef popolon het volgende:
Ja da's Engels, daar begrijp ik niks van.

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Op zondag 16 maart 2008 10:20 schreef Basp1 het volgende:
Waarom boekt de ene firma het af als credit loss en de andere als write down?

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Op zondag 16 maart 2008 10:10 schreef SeLang het volgende:
Tussenstand verliezen op subprime per 14 maart 2008 (in miljarden US$)
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Op zondag 16 maart 2008 08:27 schreef indahnesia.com het volgende:
Leuk, al die 'achtergrond'-artikelen die eigenlijk wereldnieuws moeten zijn. Wanneer komt het moment dat een grote omvallende bank wereldnieuws is? Lijkt me wel nodig, want de bewustwording is er niet echt. Zelfs Indonesische banken zijn meer te vertrouwen dan die in de VS zo onderhand

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... potential bidders for Bear have been narrowed to ... J.C. Flowers and JPMorgan Chase

... bankers have now come to the conclusion that a deal must be done by Monday ...

If there's no deal Bear Stearns will have to file for bankruptcy, executives said.

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Op zondag 16 maart 2008 10:32 schreef Drugshond het volgende:

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Oe... heb je hier een linkje van.

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Op zondag 16 maart 2008 10:35 schreef gronk het volgende:

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U vraag, er wordt gedraaid: op CNBC
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Op zondag 16 maart 2008 10:48 schreef SeLang het volgende:
Lachen: Google-Ads genereert advertenties onder dit topic:

[ afbeelding ]

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Is George Soros right that economy is doomed?

Richard Woods

When George Soros says that the world is facing its worst financial crisis since the second world war, businessmen, politicians and the public pay attention. This, after all, is the man who famously made $1 billion betting against the pound in 1992.

The 77-year-old investor issued his dire warning at the World Economic Forum in Davos last week amid increasing volatility in the world financial markets, but before the huge losses at Société Générale had become public.

“The current crisis is not only the bust that follows the housing boom,” he said. “It’s basically the end of a 60-year period of continuing credit expansion.”

Now the party is grinding to a halt and the hangover will be a humdinger. “Credit expansion must now be followed by a period of contraction,” he claimed. “A recession in the developed world is now more or less inevitable.” The effect was likely to be contagious and infect the whole globe. It was, he concluded, the “end of an era”.

So is the world poised on the edge of an abyss? Or is Soros too gloomy by half?

Not everyone believes that pain for the financial suits inevitably spells trouble for the wider world.

“Purely from the point of view of the financial markets, there is probably more turbulence on a wider scale than ever before,” said Professor Willem Buiter of the London School of Economics and a former member of the Bank of England’s monetary policy committee.

“But you should not listen only to the anguish and pain of Wall Street. They are getting hammered. They are one of two sectors in the US that have expanded beyond sustainable levels: the financial sector and the housing sector. Both have to contract.

“But it is not yet Main Street. I don’t expect anything catastrophic.” There is still a chance, he believes, that the US will escape recession.

Others point out that western economies have weathered previous financial crises with remarkable resilience. “In 1987 on Black Monday stock markets fell about 20%,” said Gabriel Stein, a director of Lombard Street Research, a leading economic consultancy. “So [the present turmoil] is certainly not the biggest stock market fall. Looking back, we now know that 1987 was the buying opportunity of a lifetime.”

Though Stein agrees there are serious problems, especially in banking systems and credit markets, he remains sanguine about the ability of free economies to adjust and recover. They did so after the American savings and loan crisis of the 1980s, the Asian financial crisis of 1997-99 and the bursting of the dotcom bubble in 2000.

“George Soros is very much given to exaggeration. There will be problems. [But] the world economy will survive,” Stein said.

Other experts may not entirely buy the Soros vision, but they do increasingly believe that the US and UK economies are heading into storms.

“There’s a very high risk of recession in the UK and in the US, and the eurozone will see a sharp slowdown later this year,” warned David Owen, chief European economist at Dresdner Kleinwort bank. The big danger in the UK is the housing market. Experience shows that downturns in housing markets tend to last for years, he said, and the latest figures show mortgage approvals in Britain are down 40% on a year ago.

The stock markets are already in a volatile state. One day share prices plummet on fears of further financial woes and wider recession. The next they soar on the back of lower interest rates and hopes of escape. The reality is nobody is sure how bad things are.

“A lot depends on how serious the problems in the financial sector are,” said Roger Bootle, economic adviser to Deloitte. “Heaven knows what else is going to crawl out of the woodwork.

“It’s not just going to be confined to sub-prime mortgages. It’s going to be prime mortgages, nonmortgages, consumer debt, commercial property lending, corporate debt . . . people are going to be surprised.

“But that’s what happens when you get the unwinding of a massive asset boom simultaneously with a slowing economy.”

This unwinding of the financial boom will hit ordinary consumers, he says. The economy will slow and unemployment will rise. “But it will be modest - a couple of hundred thousand maybe - compared with what we have seen in the past.”

While individuals will feel the squeeze, greater shifts will take place on a global level. Through the turmoil, relative wealth and power are moving from West to East. “The crisis accelerates the shift in economic weight and power to the Gulf and to the East,” said Buiter. “The new moneybags, the sovereign wealth funds and others in the Far East and the Gulf are going to buy up large chunks of prime assets in the West.

“It will undoubtedly be accompanied by a shift in political and diplomatic power. The US will never again be what it was in 2000, or what it felt it was.”

So in that sense, maybe it is the end of an era.